We don’t have to tell you that Southern California’s real estate
prices are much higher than most parts of the country. Here in Los Angeles
County, we have some of the highest home prices in the nation. For example,
a simple three bedroom, two bath, 1,539 square foot home in Sherman Oaks
can go for around $850,000 as of this writing.
In contrast, a four bedroom, two bath, 1,744 square foot home in Buffalo,
New York goes for about $69,900 – huge difference! If you want to
have fun with the numbers, you can compare real estate in LA to other
parts of the country on sites, such as
If you are getting a
divorce in Los Angeles County or one of the surrounding areas, there’s a
good chance that your marital residence is one of the biggest assets in
your marriage, if not the BIGGEST asset, especially if you have equity
in the property.
If you have equity in the house, deciding what to do with it will be one
of the most important decisions you make in your divorce. If your house
is upside-down (the loan is more than the house is worth), you’ll
still need to figure out the best solution because the house a major liability.
Making the Best Decision
For some couples, deciding what to do with the marital residence is a piece
of cake, but for others it’s a complicated matter. If the house
is the couple’s most valuable asset, they must tread carefully.
One issue is emotional attachments. Some people are very attached to their
homes, especially if they’ve remodeled them, lived in them for many
years, or raised their children in them.
If you have doubts about what to do with the house, you will need to take
several considerations into account, such as:
- Is there equity in the house? If so, how much?
- Do you have another asset that can be traded for the house?
- Can the spouse who wants to keep the house afford it?
- Can the spouse who wants to keep the house qualify for a mortgage in their
- Does the house need a lot of repairs?
- Where will the children be living?
- What are the tax implications?
First, we want to take a look at who owns the house. Did you both buy the
house after you got married? If both of you took out a mortgage after
the date of marriage, the house would be considered “community property.”
Meaning, the house is marital property and therefore owned by both of
you. But, if only one spouse’s name is on the title and mortgage,
it can complicate things and the house may be considered separate property.
In some cases, though, this presumption can be overcome but it’s
If the house was acquired during the marriage by ONE spouse as a gift or
an inheritance, then the house would NOT be
community property. It would be “separate property” and therefore not subject
to division in the divorce. In this situation, the house would only belong
to the spouse who acquired it through a gift or inheritance.
Usually, a house is considered “separate property” when it
beforethe marriage. However, things can get sticky when the spouse who is not
on the title pays the mortgage or contributes to it, or puts money into
improvements. When this happens, especially in the case of a long marriage,
the spouse who is not on the title can certainly have an interest in the property.
Should You Sell & Divide the Profits?
In general, the best way to handle a marital residence is to sell it and
divide the profits down the middle. In many divorces, this is the most
reasonable and logical option, especially when neither spouse can afford
the mortgage by themselves. Another good option is a buyout, but this
only works when one spouse can: 1) afford the mortgage on their own, and
2) qualify for a mortgage by themselves.
For a spouse to buy the other spouse out, they have to give their soon-to-be
ex their share in the property. To do this, the spouse who is keeping
the house must be able to refinance the home in their name alone and pay
their spouse their share. The spouse who is walking away must also be
removed from the mortgage.
If you wish to take full ownership of the marital residence, ask yourself:
- Can I qualify for a mortgage in my name alone?
- Can I afford the monthly mortgage payments?
- Can I afford the insurance?
- Can I afford to maintain the property?
- If there is a major repair, can I afford it?
- Can I afford the utilities?
- Can I afford the property taxes?
- Would I be in a better financial situation if we sold the house, split
the profits, and I moved into a more affordable place?
You Can’t Make an Emotional Decision
When couples are deciding what to do with the marital residence, they have
to leave emotions out of it. Deciding which spouse gets the home isn’t
about who wants it more, it’s about money – mortgage responsibilities,
taxes, upkeep, and affordability. For example, you wouldn’t drive
around a Mercedes S-Class Sedan if all you could afford is a Honda Civic.
In a divorce, you have to have the same mindset about a house as you would
a vehicle or another major financial decision. Whether it’s a car,
college tuition, health insurance, or a house, you have to make the decision
that makes the most financial sense. You can’t decide based on emotional
attachment alone. If you treat it like a business decision, you’ll
be able to reach the best possible solution.
Tips for Negotiating a Divorce Settlement
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